Note buyers for private lenders: how loan sales are priced

Who are note buyers?

A note buyer is anyone who buys an existing loan: the promissory note and the mortgage or deed of trust that secures it. In private real estate lending the phrase covers very different investors, from a credit fund buying new performing bridge loans under a forward flow agreement to an investor buying defaulted loans at a deep discount. The types above differ mainly in what they buy, how much risk they will price, and how they want to be approached.

Banks are a distinct group because their regulators set expectations for loan purchases. The OCC says a bank “should perform due diligence before purchasing loans,” including credit analysis independent of the seller (OCC Bulletin 2020-81), and the FDIC tells institutions to underwrite and administer purchased loans and participations as if they had originated them (FDIC FIL-49-2015). Securitization aggregators are another: Morningstar DBRS describes one sponsor of residential transitional loan securitizations as a mortgage loan aggregator that partners with third-party originators to acquire business-purpose bridge and term loans (Morningstar DBRS). For more on that route see correspondent lending for private lenders, and for the main capital options side by side, capital providers for private lenders.

How do note buyers price a loan?

To yield. The buyer decides the annual return it needs on a loan with that risk, discounts the loan’s expected cash flows at that rate, and quotes the result as a percentage of the unpaid balance. Par is 100. If the loan’s net rate beats the buyer’s target the price is above 100, a premium; if it falls short, below 100, a discount.

Three things move the number most:

• Expected life. A bridge loan that may pay off in months earns little from a premium, so buyers keep premiums small and care about minimum-interest and extension terms. A DSCR loan with a longer expected life makes each point of rate worth more, which is why prepayment terms matter.
• Servicing retained or released. If you keep servicing, you keep a fee out of each payment, so the buyer receives a lower rate and pays a lower price. Releasing servicing usually raises the price but hands over day-to-day contact with your borrower.
• Risk and file quality. Leverage, borrower experience and credit, the property, the exit and any gaps in the file all push the buyer’s target yield up or down. Missing documents are the easiest discount to avoid.

The full mechanics, with worked hypothetical examples for a bridge loan and a DSCR loan, are in how loan buyers price bridge and DSCR loans. Read any premium recapture clause before you count a premium: it can require you to give some back if the loan pays off early.

How to sell a note, step by step

1. Decide what you are selling: one loan or a pool, whole loan or participation, servicing retained or released. See participations vs whole loans vs note-on-note.
2. Build a clean loan tape and organize the files, so a buyer can screen quickly and trust what it sees.
3. Shortlist buyers whose criteria fit: loan type, size, leverage, states and performance status. Our guide to finding buyers for whole loans covers where to look.
4. Share under a confidentiality agreement, collect indications of price, and pick a buyer.
5. Let the buyer diligence the files, and answer questions in writing.
6. Negotiate the purchase agreement: price, representations and warranties, repurchase obligations, premium recapture and servicing terms.
7. Close: assign the note and the mortgage or deed of trust, deliver the original note and collateral file, settle funds, and notify the borrower and transfer or keep servicing as agreed.

Selling notes to investors can raise securities, licensing and tax questions depending on how the sale is structured and who the buyers are. This page is general information, not legal advice; consult counsel.

Performing vs non-performing notes

A performing note is current, and its price is mostly about rate, term and risk. A non-performing note is delinquent or in default, and its price is about what the buyer expects to recover, how long it will take and what the workout or foreclosure will cost. That usually means a much deeper discount and a different set of buyers.

Buyers of troubled loans also look at what can be fixed: a borrower who can be brought current, a project that can be finished, or a property that can be sold. The FDIC, for example, sells loans from failed banks “regardless of performance status or quality,” in pools marketed on a competitive, sealed-bid basis, and encourages bidders to review the files and do their own investigation (FDIC). If you hold a loan that is heading into trouble, compare a sale with working it out yourself; see the default and workout process.

What do note buyers diligence?

The same things you checked before funding, and how you have serviced the loan since. Expect a buyer to review the loan tape, then the files: note, mortgage, assignments, title policy, appraisal, entity documents, insurance, budget and draw history, and the payment history. The OCC lists the information a bank buyer ordinarily receives, including the credit agreement, underwriting documentation, collateral descriptions and values, lien status and the status of principal and interest payments (OCC). Our lender due diligence checklist is a good map of what a buyer will re-check.

Institutional buyers also check the loan against their eligibility criteria. KBRA notes that eligibility criteria in rated RTL securitizations commonly limit “loan size, leverage, unfunded commitments, construction exposure” (KBRA, 2026), so a loan outside those limits may be priced lower or declined.

Selling your loans through Lender Capital

Lender Capital is a business-to-business capital platform for private lenders: capital partners fund whole first-lien, business-purpose real estate loans at closing or buy whole loans lenders have already funded. It is not a lender or fund, and it never lends or buys loans with its own money; capital partners fund or buy the loans.

If you already funded a loan and want to free up the capital for new loans, you can sell it through Lender Capital: a capital partner buys the whole loan. Lender Capital handles loans originated by lenders only (no seller-financed or carry-back notes from individuals and no land contracts), performing or not: a performing loan (no payment now or ever more than 29 days late, and no default) is sold as one, see sell performing notes; a sub-performing or non-performing loan is sold as is with its default disclosed, and a non-performing one goes only to capital partners that buy them, see sell non-performing notes. In the lender portal you submit it as a whole first-lien, business-purpose loan (bridge, fix and flip, ground-up construction or DSCR rental) with the current balance, original funding date, any unfunded rehab balance, a payment history summary, your asking price and whether servicing is released or retained, plus the original title policy, payment and draw history and the usual file. It goes only to capital partners whose criteria it fits, they review the full file, and the sale settles through an escrow agent. The fee is 0.75% of the purchased balance (0.50% for preferred lenders), with a $2,500 minimum, paid only if the sale closes; there is one payer per deal, the seller by default or the buyer if the loan is listed buyer-paid. Loans are sold whole on Lender Capital; participations are not offered.

Selling after closing vs placing at closing

Selling after closing means you fund the loan first, with your own capital or a warehouse line, carry it, then negotiate price and diligence with a buyer. That is the only option for loans you already own, and the buyer usually takes the future interest.

Placing at closing works earlier. With Lender Capital’s direct capital placement, each loan goes only to capital partners whose criteria it fits; they see the full file before committing, and one partner funds the whole loan at closing (table funding), with the loan assigned to it at closing. You keep servicing and the borrower, keep your points (less the placement fee) and earn a yield spread: price the note above the partner’s agreed rate and the difference is yours. Hypothetically, a 12% note placed with a partner at 10% leaves you a 2% spread plus your points.

Frequently asked questions

Who buys private real estate notes?

Credit funds, family offices, hedge funds, banks and credit unions (often as participations), securitization aggregators through correspondent programs, and investors who specialize in discounted or non-performing notes. Which one fits depends on the loan type, size, leverage and whether the loan is performing.

How much will a note buyer pay for my loan?

It depends on the buyer’s target yield, the loan’s net rate and expected life, the risk and the file. A performing loan whose net rate beats the buyer’s target can sell above par; one that falls short, or has gaps in the file, sells at a discount. Non-performing loans sell at deeper discounts.

Can I keep servicing after I sell a note?

Often, if the buyer agrees to a servicing-retained sale under a servicing agreement. You keep a servicing fee and the borrower relationship, and the buyer pays a correspondingly lower price because it receives a lower net rate.

What is the difference between a note buyer and a capital partner?

A note buyer purchases a loan after it has closed and been funded. A capital partner in direct capital placement funds the whole loan at closing, after reviewing the full file, and the loan is assigned to it at closing, so the lender never carries it. On Lender Capital, a capital partner can also act as the buyer of a whole loan you already funded.

Can I sell a loan I already funded through Lender Capital?

Yes: Lender Capital lets you sell a whole first-lien, business-purpose loan you already funded through Lender Capital: a capital partner whose criteria it fits buys the whole loan, and the sale settles through an escrow agent. Lender Capital never buys with its own money. The fee is 0.75% of the purchased balance (0.50% for preferred lenders), $2,500 minimum, only if the sale closes. Participations are not offered.

Sources

• Office of the Comptroller of the Currency, Bulletin 2020-81: Risk Management of Loan Purchase Activities
• FDIC, FIL-49-2015: Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations
• FDIC, Loan Sales (how the FDIC sells loans from failed banks, performing and non-performing, by sealed bid)
• Morningstar DBRS, ratings release on Toorak Mortgage Trust 2025-RRTL1 (February 10, 2025), describing a mortgage loan aggregator that acquires business-purpose bridge and term loans from third-party originators
• KBRA, Laying the Foundation: The Evolution of RTL Lending (July 30, 2026)